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Canada and the Great Depression

Learning Outcomes

1.  Explain the causes of the Great Depression in Canada

2.  Evaluate the response of the Canadian government to the Great Depression

3.  Evaluate the social, political, and economical repercussions of the Great Depression on Canada

Causes of the Depression 1.   Over Production and Expansion - Canada's companies expanded their

industries so they could meet war demand. As European industry recovered, Canadian industry and agriculture were overproducing causing prices to fall (supply exceeded demand)

2.   Dependence on Commodity Exports - Canada's economy was overly dependent on commodity (raw materials, primary resources, agricultural products) exports. As U.S. and European demand fell it created a significant drop in sales causing an economical depression.

3.   Dependence on the United States - The U.S. was one of Canada’s largest buyers of timber and minerals. Also, U.S. corporations were buying shares of Canadian industries, linking the stock markets of the two.

Causes of the Depression 4.   High Tariffs – in a effort to prop up Canadian products the national

government raised tariffs. The protectionist strategy backfired when other countries imposed retaliatory tariffs on Canadian goods.

5.   Too Much Debt- Canadians bought too much on lease and credit including stocks. Therefore when the stock market crashed (partly due to the margin buying), Canadians were in debt and faced a trying time as they attempted to sell their personal belongings or were having their half paid-off possessions repossessed. Don’t forget, governments (whole countries) were in mass amounts of debt too.

6.   The Dust Bowl - The Prairies were hit extremely hard by several years of drought. Dust storms swept across the prairies, making it impossible for farmers to grow wheat. Thus, since the farmers had frequently bought their seed and machinery by using credit, when they couldn't pay off their debts, the farmers were often bankrupted and rural banks failed.

Causes of the Depression 7.   Laissez-faire policy of the federal

government " W.L. Mackenzie King: Prime Minister

(Liberal Party) of Canada from 1921 to 1930.

"   Mackenzie King’s government presided over a period of unrest among farmers in the Prairies as farm prices declined.

"   He also faced growing dissent from WWI veterans who expected their sacrifices to be compensated during difficult economic times.

"   His policies (and subsequent governments) failed to meet the needs of the Canadian people

Causes of the Depression 8.  The Stock Market Crash.

What is the Stock Market? "   The stock market is a part of a market economy.

"   A market economy is based in a capitalist economic system, where individual producers and consumers control the supply and demand of products and services (direct contrast to a communist system, where everything is controlled by government)

"   Markets allows buyers and sellers to exchange or trade stock.

"   A share of stock is literally a share in the ownership of a company. When you buy a share of stock, you're entitled to a small fraction of the assets and earnings of that company.

"   Assets include everything the company owns (buildings, equipment, trademarks), and earnings are all of the money the company brings in from selling its products and services.

"   Why would a company want to share its assets and earnings with the general public? Because it needs the money, of course!

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What is the Stock Market? "   In a free market system, the price of any commodity will rise as

demand for it increases, as long as there's a fixed amount of the commodity in circulation.

"   The same is true for stocks. If there are a fixed number of shares in circulation, then the price of the stock will rise as more people want to buy it, and fall as more people want to sell it.

"   The value of a stock is based on speculation: the potential future value of it.

"   The key to investing is "buy low, sell high." You want to buy a stock at $2 a share and then sell it when it's $20 a share.

What is the Stock Market? "   The inherent risk of the stock market is that any number of forces

-- logical or otherwise -- can push prices up or down.

"   In recent years, we've witnessed the boom and consequent bust of two large stock market bubbles that formed around the Internet sector in the early 2000s and the housing market six years later.

"   In both cases, commodities became overvalued, and investors poured money into unprofitable or unsustainable markets.

"   When the truth came out, investors rushed to sell, sending stock prices crashing and sending the economy into a recession.

What is a Stock Market Crash? "   Like everything in life, business goes through cycles… ups and

downs and back up and back down again, times of prosperity and times of recession.

"   A stock market crash is a sharp and unexpected decline of stock market prices. As a result, investors realize significant capital (monetary) losses.

"   The losses themselves cause panic and fear among market participants, this deepens the contraction and causes more losses, they cause more panic, etc.

"   This way a stock market crash is usually a self reinforcing process that is totally uncontrollable.

Causes of the Depression 8. Stock Market Crash of 1929

"   A lot of people wanted to “get rich quick” and they bought stock on margin which meant that they borrowed money to buy stock: "   If a stock is worth $100, you could buy it for $10, and pay back

the $90 when the stock rose

"   This is a great idea, in theory, but because of the huge rush to buy stocks, this falsely drove their value up "   Stocks are valued based on speculation – what will the stock be

worth? If enough people “believe” in the stock, it drives the price up… even when it’s not actually worth that much

Stock Market Crash of 1929

"   Some investors (who perhaps knew what they were doing) decided that it was a good time to sell – they stood to lose money if the stocks ever fell – “buy low, sell high”

"   Well, because they sold, this caused inexperienced investors to panic… this causes the price of stocks to drop dramatically

"   Now, your $100 stock is worth only $50 but you still owe $90.

"   Now times this lost by millions of investors and by billions of dollars.

Black Tuesday "   On Tuesday, October 29, 1929, the New

York Stock Market collapsed.

"   As soon as the stock exchange's gong sounded, a mad rush to sell began. Trading volume soared to an unprecedented 16,410,030 shares and the average price of a share fell 12 percent.

"   Stocks were sold for whatever price they would bring. White Sewing Machine Co. had reached a high of $48 a share. One purchaser--reportedly a messenger boy--bought a block of the stock for $1 a share.

"   By 1932, stocks were valued at just 12 percent of what they had been worth in September 1929.

"   Altogether, between September 1929 and June 1932, the nation's stock exchanges lost $179 billion in value.

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Canadian Perspective "   Canada’s stock market (Toronto) was closely linked to the NYSE,

thus when the U.S. market crashed so did the CSE

"   The Canadian economy was primary resource-based: wheat and pulp & paper – at the time, Canada supplied 40% of the world demand for wheat and 60% of the demand for newsprint.

"   Demand lowers, exports in wheat, minerals, pulp & paper and timber fell by 50%. Between 1929-1933 our GDP fell 40% and unemployment rose to 27%

"   High tariffs (protectionism) restricted trade even further. As international sales decrease, so do local incomes and jobs (lay offs), as lay offs increase, people stop buying manufactured goods, as sales decrease for manufactured goods, lay offs in manufacturing plants and industry increase.

"   Individuals, companies, and countries are in massive debt.

Canada and the Depression that ensued

"   Factories and business close their doors.

"   More and more people are out of work.

"   People are being evicted from their homes

"   Men, women and children line the streets begging for food and shelter

"   Suicide rates soared

"   Soup kitchens dolled out free food to millions

"   We were headed into an economic depression: a period of severe economic and social hardship, massive unemployment, and terrible human suffering.

The Prairie “Dust Bowl”

"   Drought lasted 8 years starting in 1928

"   Dust storms were frequent – wind blows away rich top soil – no top soil, no growth (see p. 79)

"   Grasshoppers came in – it was like the signs of the apocalypse!

"   1935: Prairie Farm Rehabilitation Administration Act "   Irrigation systems and

reservoirs

What did the government do about it?

"   Under Mackenzie King’s laissez-faire leadership the national government took minimal action to provide relief or encourage economic recovery.

"   Relief programs were the responsibility of ill-equipped provincial governments. "   “Pogey” – relief payments given to those with no alternative income,

usually in the form of food vouchers "   Horribly humiliating – waited hours in line to publicly declare that you were

bankrupt: you had to prove that you had nothing to your name and that you were being evicted from your home

"   Conservatives led by R.B. Bennett won the government in 1930 – the Canadian public needed the government to do more

R.B. Bennett "   Prime Minister (Conservative

Party) of Canada from 1930 to 1935, during the worst of the Great Depression years.

"   Bennett tried to combat the depression by increasing trade within the British Empire and imposing tariffs for imports from outside the Empire. Known as the Imperial Preference Policy

"   The Conservative pro-business policies provided little relief for the unemployed

Canadian Relief Camps "   October 1932, Bennett

establishes a network of relief camps for unemployed and homeless men.

"   Run by the military.

"   In return for bunkhouse residence, 3 meals a day, work clothes, medical care and 20 cents a day, the "Royal Twenty Centers" worked 44-hr weeks clearing bush, building roads, planting trees and constructing public buildings.

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Canadian Relief Camps "   Critics argued that the federal

government had established the camps in lieu of a program of work and wage increases.

"   Conditions in the camps were abhorrent, not only because of the low pay, but the lack of recreational facilities, isolation from family and friends, poor quality food, and the use of military discipline.

"   Communist Party leaders saw a chance to organize strikes in the camps. Forming the Relief Camp Worker’s Union

"   Men in the camps could neither vote nor organize.

"   The camps were voluntary, but men who resisted could be arrested for vagrancy.

"   The camps were located in remote areas, such as the interior of B.C. and northern Ontario.

On-to-Ottawa Trek "   April 1935. After a two-month

protest in Vancouver, B.C. camp strikers voted to travel east to Ottawa and take their grievances to the federal government.

"   Strikers’ demanded: "   Adequate first aid in the

camps "   Extension of the Workmen’s

Compensation Act to camp workers

"   Repeal of Section 98 of the Criminal Code

"   Right for camps workers to vote in federal elections.

Regina Riots "   Bennett invited trek leader Slim

Evans to talks, on the condition that the 1600 strikers remain in Regina. (Where an encampment of RCMP waited)

"   A public meeting in Market Square announce a breakdown in talks

"   At 8:00 PM a whistle signaled the beginning of an attack by police on strikers

"   Trekkers in a nearby stadium where detained in a make-shift prison camp

Aftermath of Regina

"   Discredited the Bennett government, 1935 elections Conservatives went from 134 seats in Parliament to 39.

"   Public sympathy for the Trekkers (strikers) spilled over to newly forming socialist parties (CCF) which organized the protest.

"   The military camps were dismantled and replaced with smaller camps managed by provincial governments with slightly better pay using federal funds

"   Public support set the tone for social welfare reforms to take place after WWII.

Bennett’s New Deal "   January 1935, Bennett announces in a radio address “I am for reform”

and launches his own New Deal.

"   The plan called for federal government intervention: > minimum wage, maximum work week laws, > unemployment insurance > retirement pensions, health insurance > mortgage assistance for farmers

"   Most of the New Deal was seen by the Supreme Court of Canada and the Judicial Committee of the Privy Council as an encroachment on the authority of provincial governments and struck down as violation of Section 92 of the British North America Act (Canada's Constitution)

"   Bennett’s reform effort was seen as too little, too late by voters who elected Mackenzie King in October 1935

Mackenzie King Returns "   Prime Minister (Liberal Party) of Canada from 1935 to 1948.

"   Introduces relief programs: "   National Housing Act "   National Employment Commission

"   Nationalizes: "   Canadian Broadcast Corporation 1936 "   Trans-Canada Airlines (Air-Canada) 1937 "   Bank of Canada 1938

"   From 1939, an increased demand in Europe for materials, and increased spending by the Canadian government on public works created a boost to the economy.

"   Unemployment declined as men enlisted in the military.

"   By 1939, Canada was experiencing economic prosperity for the first time in a decade.

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C.C.F. "   Co-Operative Commonwealth Federation (CCF) Socialist

political party established in Calgary, Alberta in 1932.

"   Platform: "   Concentration of wealth in the hands of a few threatened

democracy. "   New social order calling for production and distribution for

the public good not private gain.

"   Regina Manifesto 1933: "   All industry related to social planning would be nationalized "   Universal health care, unemployment compensation, and

pensions would be provided by amendments to the BNAA

"   The CCF enjoyed modest success in the Western Provinces

Rowell-Sirois Report "   Attempts at providing relief during the Depression were

exacerbated by legal issues over the division of power between the national and provincial governments under the BNAA.

"   Royal Commission on Dominion-Provincial Relations 1937. 1940 recommendations: "   Found that provincial responsibility for health, education, and

welfare had grown beyond the capacity of some provinces "   Federal government should take over taxation authority and

provide the provincial governments income through grants (equalization payments)

"   Federal government should take responsibility for retirement pensions and unemployment insurance.

Communism in the USSR

"   Bolshevik Revolution: November 1917 à new gov’t

"   Lenin signs Treaty of Brest-Litovsk, ends Russian involvement in WWI

"   Lenin introduces New Economic Policy: Blends Communism with limited Capitalism

"   Lenin dies, Stalin Rules as Dictator

Fascism in Italy

"  Right-wing radicalism: anti-Communist, anti-capitalist, anti-democratic; Hyper nationalism

"  Mussolini uses political and social upheaval to gain control

"  Great Depression à dictatorial characteristics: secret police, censorship, state control of press, etc.

Nazism in Germany: 3 R’s

•  Resentment •  Treaty of Versailles reparations

left them broke

•  Ruined •  Currency worthless •  Price of goods skyrocketed as

stock market crashed

•  Revenge? •  Hitler openly criticized the

“weak” German government •  Makes his move: the Nazi’s

abolish all other political parties and name Hitler as Fuhrer

•  Hitler wanted to rebuild Germany as a World Power

Conclusions: Interwar Years

“The war years and the decade that followed were a time of social upheaval and reform. As Canada became increasingly urban and

industrial, reformers sought to improve society on all fronts: education, regional disparities, religion, poverty, health, and government policy.”

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Conclusions: Interwar Years

①  The economic boom of WWI led to a subsequent crash in Canada a decade later because of:

•  Over production

•  Massive unemployment

•  Drought •  Dependence on U.S. market

•  Too much credit

•  Stock Market crash

•  Protectionist policies

Conclusions: Interwar Years

② The Interwar Years were a period of strong social reform, such as banning alcohol (prohibition), granting women the right to vote (suffrage), and fighting poverty (creation of social assistance programs).

•  Attitudes changed from the old Victorian beliefs – especially towards those who are poor (it was seen as no longer their fault)

•  New political parties (such as CCF) were born of this era)

Conclusions: Interwar Years

③  Canada became a bitterly divided nation as result of Conscription during WW I and the French/English tensions grew during the Great Depression – we saw the rise of the Union Nationale in Québec – a separatist political party under Maurice Duplessis

Conclusions: Interwar Years

④  Politics in Canada were changed – laissez-faire was dead – governments needed to take on a bigger role, specifically in the economy (tax policy, monetary policy (interest rates), fiscal policy (expenditures) and national currency

Conclusions: Interwar Years

⑤  The rise of dictatorships in Europe set the stage for WWII

Review of Learning Outcomes (whole unit)

1.  Describe the labour movement and women’s movement in Canada following the war

2.  Explain regionalism in the context of the Interwar years

3.  Identify and describe the significance of events contributing to national autonomy during the 1920’s

4.  Describe what was life was like for Canadians by the mid to late 20’s

5.  Explain the causes of the Great Depression in Canada

6.  Evaluate the response of the Canadian government to the Great Depression

7.  Evaluate the social, political, and economical repercussions of the Great Depression on Canada